–Price Gouging:Jacob Goldstein writes about why economists like price gouging. “Like millions of other people up and down the East Coast, we stocked up this weekend on peanut butter and crackers and powdered milk and bottled water and cans of beans and tomatoes and tuna. The prices for all those things were the same as they always are. But if the grocery store had doubled or even tripled its usual prices in response to the pre-hurricane rush, we would have bought the food anyway. We needed it, and we didn’t have time to shop around. As far as most economists are concerned, it would be totally reasonable for a grocery store to raise prices the day be for a hurricane. In fact, that’s what’s supposed to happen. If prices don’t go up when demand increases, you wind up with shortages. To an economist, empty shelves at grocery stores are evidence that prices were too low.”

–Retirement:Tim Taylor looks at how retirement age and Social Security synch up. “The evidence here seems clear: People are making their retirement choices in synch with the government-set normal retirement age. This pattern isn’t new, as the authors point out, a spike in retirement age at 65 became visible in the data back in the early 1940s, about five years after Social Security became law. Still, the obvious question (for an economist) is why people would make this choice. If you retire later than the normal retirement age, your monthly benefits are scaled up, so from the viewpoint of overall expected lifetime payments, you don’t gain from retiring earlier. A number of possible explanations have been proposed: 1) people don’t have other sources of income and need to take the retirement benefits as soon as possible for current income; 2) people are myopic, or don’t recognize that their monthly benefits would be higher if they delayed retirement; 3) many people are waiting until age 65 to retire so that they can move from their employer health insurance to Medicare; 4) some company retirement plans encourage retiring at age 65.”

–Tax Reform:Bruce Bartlett points out the obstacles to tax reform. “The problem is that when you take one popular deduction off the table, that becomes the best possible argument for keeping the next most popular deduction or exclusion and so on. Taking the top 10 off the table means taking more than 70 percent of the dollar value of all tax expenditures off the table, thus greatly limiting the potential for tax reform to lower rates.” Read More »

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